UPS’s third quarter saw the company surpass Wall Street’s revenue and profit expectations, driving a positive market reaction. Management attributed the quarter’s results to a deliberate shift in customer and product mix, as well as ongoing cost reduction initiatives. CEO Carol Tomé cited a “planned glide down of Amazon volume and a targeted reduction in lower-yielding e-commerce volume” as the main reasons for falling U.S. package volume, alongside strategic efforts to drive higher revenue per piece. The company’s automation investments and success in controlling expenses helped offset top-line pressure from both lower volumes and new trade policy headwinds.
Is now the time to buy UPS? Find out in our full research report (it’s free for active Edge members).
United Parcel Service (UPS) Q3 CY2025 Highlights:
- Revenue: $21.42 billion vs analyst estimates of $20.89 billion (3.7% year-on-year decline, 2.5% beat)
- Adjusted EPS: $1.74 vs analyst estimates of $1.31 (33% beat)
- Adjusted EBITDA: $3.06 billion vs analyst estimates of $2.49 billion (14.3% margin, 22.9% beat)
- Revenue Guidance for Q4 CY2025 is $24 billion at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 8.4%, in line with the same quarter last year
- Sales Volumes fell 9.8% year on year (7.1% in the same quarter last year)
- Market Capitalization: $79.75 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From United Parcel Service’s Q3 Earnings Call
- Christian Wetherbee (Wells Fargo) asked about the trajectory of domestic margins as the Amazon volume drawdown concludes. CFO Brian Dykes indicated more detail would come in future quarters but emphasized ongoing cost takeout and margin improvement efforts.
- David Vernon (Bernstein) questioned the cost per piece exit rate and USPS partnership impact. Dykes and CEO Carol Tomé explained cost improvements from automation and voluntary retirements, while highlighting the USPS agreement’s potential to improve margins in 2026.
- Thomas Wadewitz (UBS) asked about the stability of small business volumes after the elimination of the de minimis exemption. Tomé noted that while UPS outperformed the market, SMBs face continued challenges and uncertainty into next year due to tariffs.
- Jordan Alliger (Goldman Sachs) inquired about international trade flow normalization post-policy changes and international margin sustainability. Dykes and international leadership discussed operational adjustments and investments in Asia, but cautioned that some trade shifts may be lasting.
- Ken Hoexter (Bank of America) asked if cost-cutting benefits could accelerate further and about the potential impact of Supreme Court tariff hearings. Dykes described continued automation and efficiency gains, and Tomé declined to speculate on tariff litigation outcomes.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be watching (1) the pace and financial impact of Amazon volume reduction and related cost takeout, (2) progress with UPS’s automation and network reconfiguration projects, and (3) the evolution of trade patterns and tariff-related headwinds, especially on high-margin international lanes. Execution on the USPS partnership and the integration of Andlauer Healthcare Group will also be key signposts for UPS’s ability to offset volume declines and drive margin improvements.
United Parcel Service currently trades at $93.81, up from $89.27 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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